Fixed grins on the faces of department heads as they trooped in to take their seats at BP headquarters in London yesterday barely disguised the tension as they awaited a statement from the boss.

Chief executive Lord (John) Browne had been at the centre of an internal row that had Britain's most admired industrialist fighting to push back his retirement date against an intransigent chairman, Peter Sutherland.

Many of those sober-suited department chiefs want his job and were as anxious to hear when they would stand a chance to take over as they were to discover whether Lord Browne had called an end to a damaging boardroom bust-up.

The diminutive chief executive who has used a mixture of charm and blunt words to outwit opponents and create the UK's biggest company casually walked in amid a crash of camera shutters. This was a news conference to discuss half-year financial figures but Lord Browne made no attempt to crow about BP's latest profit bonanza and cut straight to the chase.

"Reading the speculation about my position, I was both astonished and rather shocked by it all. I want to be crystal clear about the situation. As I have said many times publicly in recent months, I will be retiring in 2008. Peter Sutherland and I have discussed this and agreed it between ourselves and the board that I will leave BP at the end of 2008.

"Let me add that even if I was asked to stay I would decline," he explained before going on to grasp the thorniest issue.

"I want to make it clear also that there is no rift between Peter and me. Neither of us is a pushover and I may say that in line with everything we do in BP mutual respect means having a good and vigorous discussion about things. That's the right and proper role of the chairman, to test the chief executive. So ours is a very long-standing relationship and it's based on this level of mutual respect."

Palpable relief swept through his lieutenants as Lord Browne moved on to less contentious ground, a 23% rise to $6.1bn (£3.3bn) in BP's second-quarter replacement cost profits and a dividend of 9.825 cents - up 10%.

He explained how the company has been propelled forward by another three months of very high oil prices, with BP able to benefit from an average of $70 a barrel, up 13% from the first-quarter figure of $62. Lord Browne gave some positive news on output and new projects before being forced to explain what he was doing about a string of problems in the US.

BP plans to establish a new advisory board to oversee BP America, and to spend a further $1bn over the next four years on top of the $6bn already earmarked to upgrade safety. The spend is part of a wide-ranging package of measures aimed at improving confidence in the integrity of BP's US operations after last year's explosion at the Texas City refinery, the recent oil spill in Alaska and the investigation into propane trading in the US.

Lord Browne said these events had caused "great shock within BP" and he repeatedly apologised to anyone affected by them.

As soon as he finished talking he was met with a barrage of questions - nearly all about his retirement.

Lord Browne had insisted that his exit date was purely a matter for the board, but he has spoken out increasingly frequently at public events in recent weeks about the iniquity of age discrimination while privately allowing it to be known that he would be willing - if asked - to stay on.

The pressure mounted last week when an oil analyst at investment bank Merrill Lynch put out a long and pointed research note raising the question of the "medium-term risk to shareholders" should he retire. By Friday the chief executive and chairman were engaged in heated discussions about the retirement date and how any announcements on it would be made.

By the weekend friends of Lord Browne were rallying supporters among the investment and shareholder community, saying at the very least no definitive statement of his retirement should be made yet. By Monday night the company was leaking like a sieve, with the formal press office position, that Lord Browne was going as expected in 2008, being undermined by senior figures insisting the situation was "fluid".

But his statement yesterday was clear and unequivocal, although he has ensured that his tenure will stretch beyond his 60th birthday to take in the company's centenary in 2008.

The BP chief said he had never asked to stay on, insisting his decision to go had been his and was based on the length of his tenure and not on age. Yet he once again railed about age discrimination, saying it was "wrong to classify people. People should be able to have many different identities and one of which is to be older than others."

Lord Browne gave few hints about what he would do after 2008 except that he had no intention of "retiring", would not get involved in politics and enjoyed business more than anything.

The 58-year-old, already a non-executive director of Goldman Sachs, would not stay on at BP in any consultant or emeritus capacity, saying enigmatically: "Besides I might be very busy."

It has been a reign that has won him a string of awards. He took over a medium-sized oil company that had lost its way and transformed it with a series of daring takeovers, swooping on Amoco then Arco and Castrol while asset prices were relatively low. He followed this up in 2003 by a daring move into Russia with the takeover of TNK and has since been angling for another major move into China. Lord Browne has also made his mark by moving into renewables and putting business ethics and staff diversity at the top of his personal management agenda.

All of this has been tarnished slightly by continuing problems in the US and by BP's decision to take a $1bn stake in formerly state-owned Rosneft, a company alleged by rivals to have "stolen" some of its assets.

Lord Browne brushed off the criticism yesterday, insisting that privatisation was "good for the world", for Russia and for Rosneft. He pointed out that BP had once been 75% government owned and had dramatically improved as an organisation since it moved into private ownership.

The focus will move slightly from Lord Browne to the runners and riders for his job. "More than three" internal candidates have already been put forward by Lord Browne but he refused to give names or say whether they included his believed favourite, Tony Hayward, or a woman, Vivienne Cox.

The two-year waiting list The next decade: Runners and riders

Tony Hayward: Head of exploration and production A safe pair of hands at the top of BP's most important and largest business unit. An amiable if somewhat shy man in his early 40s, he has been with BP since 1982, joining straight from Edinburgh University, where he studied geology. Cemented a close working relationship with his boss by becoming Lord Browne's personal assistant in 1990. Has achieved enough to be seen as Lord Browne's favourite for the job.

Vivienne Cox: Executive vice-president The executive vice-president for gas, power and renewables has enhanced her position by winning a businesswoman-of-the-year award. She studied chemistry at Oxford and business in France before joining BP Chemicals and moving on to exploration and finance. She built up BP's refining and marketing business in eastern Europe. A working mother, bright, confident and open, she has recently spearheaded the drive for solar power.

John Manzoni: Head of refining and marketing An engaging and smart character who has seen his refining division start to make serious progress in the two years he has been there. A degree in civil engineering and a postgraduate degree in petroleum engineering from Imperial College, London, were followed by a business degree from Stanford University. He then joined BP - in 1983 - and has held a variety of top jobs, including chief executive for gas, power and renewables.

Iain Conn: Executive director Edinburgh-born executive director with responsibility for Europe, the Middle East and Africa as well as health and safety issues. Another graduate of Imperial College, where he studied chemical engineering and management and now serves as chairman of the advisory board of the college's Tanaka Business School. Until recently he was chief executive of BP's petrochemical business but has worked around the group in a variety of roles.